Critics Blast Mortgage-Servicing Settlement

Critics are blasting regulators for terminating their review of bank mortgage servicing and foreclosure actions against homeowners, saying they failed to get to the bottom of questions about defective foreclosures.

Ten major banks will pay a total of $8.5 billion to homeowners, including $3.3 billion in direct payments and $5.2 billion in other assistance, as part of a settlement with the Federal Reserve and the Office of the Comptroller of the Currency.

Regulators were reviewing banks' actions in an effort to find and fix defective foreclosure procedures, but decided that continuing the reviews was too costly and time consuming. Reaching a settlement with the banks would offer more relief to homeowners and offer it faster, the regulators said.

"While today’s announcement represents a significant change in direction, it meets those original objectives by ensuring that consumers are the ones who will benefit, and that they will benefit more quickly and in a more direct manner," said Comptroller of the Currency Thomas J. Curry in a statement.

Continuing the reviews would ultimately divert money away from homeowners, Curry said. "Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation’s housing markets."

But critics disagreed and attacked the settlement.

"I have serious concerns that this settlement may allow banks to skirt what they owe and sweep past abuses under the rug without determining the full harm borrowers have suffered," stated Rep. Elijah Cummings, D-Md.

Regulators and banks failed to answer important questions, such as how the settlement amount was determined, who will receive these funds and what will happen to other families wronged by mortgage servicing companies, he said.

"I do not know what the rush was to make this settlement without answering these key questions," Cummings noted.

Regulators terminated the reviews without first briefing the House Committee on Oversight and Government Reform as they were requested, the Congressman said.